On May 13, the international index company MSCI announced its semi-annual index review results for 2020. The adjustment results show that the MSCI Global Index added 137 stocks, including 56 Chinese stocks (including A shares, Hong Kong stocks, China stocks listed abroad, etc.); 181 stocks were removed, 45 of them are Chinese stocks including Luckin Coffee, who is currently under investigation of corporate governance issue due to financial reporting scandal. CEO of Luckin coffee has been suspended since May 12.
Among them, MSCI eliminated 34 A-shares, including Anxin Trust and Hebang Biology, etc .; added 45 A-shares, including Zhonggong Education, Wanfu Biology, Shengbang shares, etc. Market professionals believe that MSCI's review is only an adjustment and has little impact on the overall level of funds, but it has a greater impact on individual stocks. It has transferred out bearish stocks and boosted the transfer of individual stocks.
Northbound funds net inflow for 8 consecutive weeks
In the past 3 trading days, the capital going northbound has shown a net inflow for 3 consecutive days. Based on what happened in the past, every major move of MSCI will attract inflow of foreign capital. As of May 12, there was only one trading day having net outflow of capital going north, with a cumulative net inflow of 7.254 billion yuan (approx. 1.02 billion USD) during the month.
Looking at a longer time period, the capital going northbound is a net inflow for 8 consecutive weeks. GF Securities believes that with reference to overseas investors, foreign capital will continue to inflow for a long period of time after the capital market is opened to international market recognition. Even if the inclusion of international index factors is suspended, foreign capital will still maintain a certain scale of inflow during the period. It is expected that the proportion of A-share foreign shares held in the next ten years will increase from the current 3% to about 10%, and the average annual inflow of A-shares will be 300 billion to 400 billion yuan. (approx. 42.25 billion USD to 56.34 billion USD)
The number of newly added 45 A share stocks' markets exceeds 211.3 million USD
Databao statistics show that the average stock price of excluded stocks has dropped by 15% this year, and the average increase of newly added stocks exceeded 30% during the year.
The latest closing market value of Zhonggong Education, China Galaxy and Century Huatong ranks in the top three, and the market value of the first two companies is over 100 billion yuan. In terms of market performance, as of the close of May 12, the share price of Zhonggong Education rose 51.9% during the year. Da'an Gene and Shagang shares doubled during the year.
In terms of net institutional capital inflows, Shagang ’s net inflow amount exceeded 150 million, Jingsheng Electromechanical and Taiji shares (002368) exceeded 10 million yuan. Jingsheng Electromechanical ’s stock price rose against the trend in early trading. The company won the bid for Central Leading Semiconductor Materials Co., Ltd. for integrated circuits in 2018. The first and second packages of equipment for the fourth section of the 8-12 inch semiconductor wafer project are purchased.
Post pandemic investment, Institutions predict 9 China A shares upside
Statistics show that in 2019, net profit growth stocks accounted for more than 70%, and the number of profitable stocks in the first quarter accounted for more than 80%. Da'an Gene, Huatian Technology, and Century Huatong all increased their net profit in the first quarter by more than 250%. In addition, Da'an Gene and Kunlun Wanwei's mid-term report performance is expected to achieve growth. During the epidemic period, Da'an Gene produces anti COVID-19 epidemic product testing kits. The company's average daily kit standard production capacity is 300,000 units per day, and the company is actively expanding overseas market.
Judging from the performance forecast of institutions this year, the net profit growth rate of 30 shares is expected to exceed 20% this year. Among them, 9 institutions predict that the target price will increase by more than 20%. The top three upsides are Kunlun Wanwei (300418), Changxin Technology (300418), and Huayu Software (300271), all of which are more than 35%; meanwhile, Wanda Information (300168), Century Huatong (002602) and Kunlun Wanwei are predicted by institutions to increase their net profit by more than 50% this year, of which Wanda Information is expected to exceed 100%. During the COVID-19 epidemic, Wanda Information strived to expand the scale of online education. The company's learning platform functions include online classrooms, personal space and other columns, and initially constructed a three-in-one educational ecological framework of learners, operators and alliances. In addition, Kunlun Wanwei's online education business has also grown significantly.
In addition, on May 22, FTSE Russell released the semi-annual index review results. According to the previous plan, FTSE Russell will increase the A-share inclusion factor from the current 17.5% to 25%.
sourced and edited from Databao